07/18/2025
Major US federal tax law changes for 2025
The US tax landscape for 2025 has been significantly shaped by the passage of the "One Big Beautiful Bill Act" (OBBB) in July 2025. This legislation extends and makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were previously set to expire at the end of 2025.
Here's a summary of key changes for individuals and businesses:
Individuals and families
Permanent tax brackets: The OBBB makes the current seven federal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) permanent, preventing them from reverting to higher pre-TCJA levels.
Increased standard deduction: The standard deduction amounts have increased for all filing statuses for the 2025 tax year. For example, the standard deduction for single filers is now $15,750, up from $15,000, and for married couples filing jointly, it's $31,500, up from $30,000.
Bonus deduction for seniors: A new, temporary deduction of up to $6,000 (phasing out at higher incomes) is available for those age 65 and older.
Child tax credit: The maximum credit increases to $2,200 per qualifying child.
SALT deduction cap: The limit on the deduction for state and local taxes (SALT) is temporarily increased from $10,000 to $40,000 for married couples filing jointly (phasing out above certain income levels). This increase is temporary and scheduled to revert to $10,000 in 2030.
Tips and overtime deductions: Deductions for up to $25,000 in tip income and $12,500 in overtime pay are available for certain workers, subject to income limitations.
Car loan interest deduction: Up to $10,000 in interest paid on a qualified passenger vehicle loan is deductible, subject to income phaseouts.
Charitable contributions for non-itemizers: A new above-the-line deduction for cash contributions is available for those who don't itemize their deductions (up to $1,000 for single filers, $2,000 for married filing jointly).
Estate and gift tax exemption: The lifetime exemption amount is increased to $13.99 million per individual for 2025, with a permanent increase to $15 million in 2026.
Elimination of personal exemptions and miscellaneous itemized deductions: These provisions remain permanently eliminated.
Clean energy credits: Several clean energy tax credits, including those for electric vehicles, home improvements, and solar panels, are scheduled to expire at various points in 2025 and 2026.
Businesses
Bonus depreciation: 100% bonus depreciation for certain property is permanently restored and retroactive to property placed in service on or after January 19, 2025.
R&D expensing: The requirement to capitalize and amortize domestic research and development expenses is permanently suspended for tax years beginning after December 31, 2024.
Section 179 deduction: The maximum amount for immediate expensing is increased to $2.5 million, with a phaseout threshold of $4 million for property placed in service after December 31, 2024.
Qualified Business Income (QBI) deduction: The 20% deduction for qualified business income is made permanent.
Increased 1099-K reporting threshold: The threshold for reporting electronic third-party payments is raised to $20,000 and 200 transactions.
International tax provisions: Changes to GILTI and FDII calculations are effective for tax years beginning after December 31, 2025.
Additional details
The IRS has also made inflation-related adjustments to other tax provisions for 2025, including capital gains tax thresholds, flexible spending account limits, health savings account deductibles, and the foreign earned income exclusion.
Several states are implementing their own tax changes in 2025, such as individual and corporate income tax rate reductions, changes to sales taxes, and property tax relief measures.
It is important to remember that tax laws can be complex and are subject to change. Consulting with a qualified tax professional is recommended for personalized advice and to ensure compliance with the latest regulations.
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